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Wednesday, June 17, 2015

(As always, the trading day's price action is explained on Keystone the Scribe's site. Reference Keystone the Scribe for further color and detail including the entire day's chronology and jump-start on tomorrow.)

Picking up the action shortly before the FOMC announcement;At 1:30 PM EST (8:30 PM in Greece), thousands take to the
streets in Athens with worries of violence increasing as night falls. The
bailout crisis is reaching a peak likely this weekend with only days remaining
before the large debt payment is due to the IMF. Greeks are concerned about
what will happen to their country if a default occurs.

At 1:35 PM, the US 10-year yield is 2.39% taking out
yesterday’s high yields. USD 94.90.

At 2 PM EST, the FOMC leaves rates unchanged as expected. The
Fed upgrades the economy modestly and says there is progress towards meeting
the rate hike criteria. The pace of job gains increases. Unemployment is
steady. The Fed says there is moderate growth in household spending. Business
fixed investment is soft and exports are soft. Energy prices are stabilizing.
VIX drops to 15.03 sending stocks higher. The SPX jumps to 2100.

The Fed statement contains no explicit wording on when the
first rate hike will occur but the member forecasts, the dot plot, indicates
that 10 members are looking for a 0.63% or higher funds rate this year (which
would be two rate hikes by the end of the year) and 15 members are at 0.38% (at
least one hike this year).

At 2:03 PM, the US dollar index is dropping. USD 94.64. VIX
14.71. 2-year yield 0.69%. SPX is above 2100. The initial reaction by traders
is that the Fed remains dovish with no firm plan on when to hike rates despite
members predicting at least one hike, or more, this year.

At 2:30 PM, Fed Chair Yellen takes the stage and reads a
prepared statement. The SPX pops from 2095 to 2099. Yellen, Queen of the Doves,
says, “Conditions for a rate hike are not yet achieved.” Yellen says progress
is occurring towards maximum employment. USD 94.65. In her characteristic
talking out of both sides of her mouth, she says, “Weakness in the labor market
remains.”

At 2:40 PM, as Yellen continues with the statement, the SPX
is back to 2102 at the highs directly after the 2 PM announcement and moving
higher. INDU 17943. USD 94.50. VIX 14.43.

At 2:43 PM, SPX 2104. VIX 14.34. Dovish Yellen knows how to
pump stocks higher. There are no plans for a rate hike so stocks jump higher.
Yellen says the first hike is data dependent continuing to kick the can down
the road.

The Q&A continues and Yellen is asked why member
forecasts point to one or two hikes this year but her comments remain reserved.
SPX 2105. Yellen keeps singing the “data dependent” song. All Hail Yellen,
Queen of the Doves, and champion of the wealthy in America that own large stock
portfolios that are filthy rich from her dovish policies. To Hell with the
middle class and poor. Let them eat cake.

At 2:47 PM, SPX 2107. The SPX gains 16 handles from before
the announcement at 2 PM. The wealthy elite high-five each other and order
caviar and champagne for tonight’s celebration. The Dow is up 80 points. USD
94.38. Since Yellen says the conditions are not met to justify a rate hike,
stocks move higher.

At 2:50 PM, as the question period continues, SPX 2105. INDU
17979. COMPQ 5076. RUT 1271. Interestingly, the Russell 2000 small caps do not
take out the highs from 2:10 PM after the initial announcement but the S&P
500, Dow and Nasdaq does. The VIX is at the day’s lows at 14.14 providing bull
fuel.

At 2:56 PM, Yellen keeps tap-dancing around the soft-ball
questions. Reporters provide no follow-up or rebuttal to her answers. They sit
there like puppy dogs lapping up her answers. VIX drops to 14.08. SPX 2106.
TRAN -0.3%.

At 2:58 PM, Yellen is asked if a rate hike will occur this
year. She says most participants feel a rate increase this year is appropriate.
VIX 14.11. Yellen says ‘we could see data ahead that would justify the dot plot
projections but no decision has been made on the timing of the first rate
increase’. She follows up saying, “Certainly a rate increase is possible this
year.” SPX 2105.

At 3 PM, Yellen says ‘independent of the timing of the first
hike in September or December or March, the rise will be gradual’. VIX 14.13.
SPX 2104.

At 3:08 PM, the SPX is 2103 fighting against the overhead
resistance 20-day MA at 2106 and 50-day MA at 2104. Thus, the 2104-2106 level
is a key pivot with market bulls winning big above and bears winning big below.

At 3:11 PM, VIX 14.42. SPX 2101. Yellen better quit while
she is ahead. Yellen is questioned on Greece and if it is impacting her
decision on the first rate hike. Yellen hopes the European leaders will find a
way to resolve the Greece situation. She says if a resolution is not achieved
global markets will be disrupted. VIX 14.39. SPX 2103.

The press conference ends at 3:30 PM. Stocks popped at 2 PM
on the initial announcement, then retreated slightly, then ran higher once
Yellen began speaking. The takeaway is that the Fed would like to hike rates
this year but remains noncommittal the same position as before the FOMC drama
this afternoon. Those looking for a firm strong hint as to when rates will
begin moving higher are disappointed but the ongoing dovishness provides lift
to stocks.

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